Gov. Christie's budget projection is the most optimistic in nation

TRENTON — When he hits the campaign trail these days, Gov. Chris Christie denounces the nation’s economy under President Obama, decrying unemployment and thundering that change is desperately needed.

"He said unemployment was never gonna go over 8 percent if we passed the stimulus plan," Christie said of Obama on the CBS program "Face the Nation" several weeks ago. "We went up over 10 percent."

But when it comes to his own state, no governor in America is more upbeat than Christie, despite warnings from several economic experts that his optimism is misplaced.

A Star-Ledger review of the budgets of all 50 states shows that when Christie projected earlier this year that New Jersey’s revenue would swell by 7.4 percent over the next fiscal year, his forecast was the highest jump of any of the 50 states — and more than double the national average of 2.8 percent.

The newspaper’s review shows the governor was far more optimistic than his counterparts in New York, Pennsylvania and Delaware, which have lower unemployment rates than New Jersey but are forecasting revenue growth under 4.7 percent for next year. When $530.8 million from tax cuts are factored in, Christie is actually expecting a more robust 9.2 percent increase in revenue.

The next cheeriest states are Hawaii and Idaho, which both expect a 5.8 percent boost in revenue. Ohio is the most pessimistic, predicting revenue will drop by 3 percent, the Star-Ledger review found.

But are New Jerseyans really in the midst of an economic miracle or is this political wishful thinking?

POLITICAL CONUNDRUM

Brigid Harrison, a political science professor at Montclair State University, said Christie’s projections were "an election-year budget."

Democrats accuse the Governor of underestimating budget surplus figures Senate President Stephen Sweeney suggested the governor underestimated the budget surplus and then "comes in like a champion" with an income tax cut in his state budget. Assembly Speaker Sheila Oliver said the revenue projection was identified last year and that the administration was notified. (Video by Andre Malok / The Star-Ledger)

"You’d be hard-pressed to find any economist to agree with those predictions," Harrison said.

The promise of higher revenue lends credibility to Christie’s claim of a New Jersey "comeback," a catchphrase emblazoned on banners at his town hall meetings and repeated during his many radio and national television appearances. Nor will the picture he has painted hurt as he competes for the spotlight at the Republican National Convention in August.

Yet Christie finds himself in a bit of a bind as he campaigns for Mitt Romney and trying to pump up the Republican’s balky battle for the presidential nomination. New Jersey’s much-touted recovery undercuts the governor’s argument that Obama has been largely ineffective in improving the national economy.

Analysts from Standard & Poor’s called the revenue estimates "optimistic" in a critical report released days after the governor unveiled his $32.1 billion budget last month. Other economists noted job creation has been slower than in other states. The state’s unemployment rate — at 9 percent — remains above the national average of 8.3 percent.

And a Moody’s analysis in January showed the state had the weakest personal-income growth in the Northeast as of the third quarter of 2011. The agency ranked the state 43rd of 54 states and territories in terms of job growth.

While the gross state product grew 2.45 percent from 2009 to 2010, according to the Commerce Department, Moody’s predicts New Jersey’s economic output will have grown only 1.5 percent from 2010 to 2011.

"New Jersey’s growth will be slow compared with the mid-Atlantic states and compared with the Northeast as a whole," Sohini Chowdhury of Moody’s said. "Given that the Northeast’s growth is expected to lag the United States’, New Jersey’s growth rate is very weak indeed."

A ROSY REVIEW

Administration officials respond by saying New Jersey’s brighter future is clear to them by looking beyond the obvious numbers.

Charles Steindel, the top economist in the state’s Treasury Department, sees more tax revenue whenever he passes a car showroom. Sales were up 30 percent in New Jersey in January, compared with a year ago, he says.

"We are not expecting a spectacular recovery," Steindel said. "But because we have one of the most progressive tax systems in the country, we get killed in recessions but get bigger boosts in the upswing."

State legislators will scrutinize the contrasting fiscal outlooks when they hold budget hearings this month.

"I believe we’re going to see growth next year, but with the unemployment numbers lagging behind other states, the numbers appear overly optimistic," state Sen. Paul Sarlo (D-Bergen), the chairman of the budget committee, said.

But Assemblyman Declan O’Scanlon (R-Monmouth), a member of the Assembly Budget Committee, said Christie has a solid track record on revenue estimates.

"Is the administration projecting a healthy recovery? Absolutely," O’Scanlon said. "Should we question their credibility in making that projection? I don’t think so. They have earned credibility because their projections have been spot on thus far."

NATIONAL INPUT

A look back at previous administrations shows most governors game the system when it comes to national versus state economy — when things are going well, it’s the governor’s leadership that turned the tide, but when things go bad, it’s the national economy at fault.

And developments beyond New Jersey’s borders will help determine the accuracy of Christie’s revenue projections, including soaring gasoline prices, a confrontation with Iran that could affect the world’s oil supply and the wobbly European economy.

"The figure is aggressive, no doubt about that," said Joel Naroff, president of Naroff Economic Advisors.

Nationally, state revenue has grown for seven consecutive quarters, and figures show only two states expect revenue to decline in the next fiscal year. But analysts also warn that revenue growth softened unexpectedly in the second half of last year.

And Christie has left little margin for error. He plans to draw down on the state’s cash reserves, reducing the fiscal safety net to $300 million — or less than 1 percent of the proposed budget.

As Todd Haggerty, a financial analyst at the National Conference of State Legislatures, put it: "We moved from the Great Recession into the Great Uncertainty."